There is an oversupply of rental homes in the Valley despite a growing demand for rentals from distressed homeowners displaced by foreclosures and short-sales.

Plenty of families are being forced to rent houses after losing their homes, but the numbers aren’t enough to counteract the lack of population growth or investors and home flippers who are buying up Phoenix-area properties and putting them up for rent.

That’s leaving an overabundance of rental properties in the market, which is putting downward pressure on rents and forcing landlords to offer concessions such as allowing pets in their units and ignoring bad credit histories of potential renters.

“In our current market right now, there is definitely saturation in the rental market,” said Joe Brown, a Realtor and sales director for Signature Real Estate Services and Azure Property Management in Scottsdale.

Brown said there have been more than 19,000 rental listings on the Multiple Listings Service, or MLS, for the first eight months of this year — up from 17,600 for the same period in 2009.

He said MLS shows 25,600 listings for home rentals for all of 2009, compared with 20,200 in 2008 and 16,500 in 2005.

“Bear in mind that as the economy slowed and more agents were willing to take rental listings, that they become more prevalent on the MLS,” Brown said, adding those numbers only include homes listed by agents on the MLS and not other rental properties advertised on Craigslist and similar websites. “The Phoenix rental market, very similar to that of the current sales market, is still in a state of recovery.”

Arizona State University economist Jay Butler said he also is seeing a glut of rental properties, including homes and apartments.

“I think there are a lot of them available,” he said.

Because investors are buying homes at cut-rate prices they are able to charge less for rents than previous landlords further depressing rental prices, he said.

Butler said the bad economy and lackluster job markets are sending people out of Arizona and putting the breaks on population growth, a long-time economic driver for Sun Belt states such as Arizona and Nevada.

The result has been rental rates dropping about 2 percent per quarter for the past couple of years, he said. The ASU economist said some apartment complexes are seeing vacancy rates of 20 percent or more.

Another effect of the oversupply is more real estate agents are listing home rentals and helping tenants and landlords work out deals. There is demand for family-friendly homes because displaced homeowners with children and pets prefer to rent single-family homes rather than apartments.

Vilyan Vergilov, a real estate agent with HomeSmart International in Scottsdale, said he’s seeing strong demand for rental homes between $1,000 and $2,000 per month from families that previously owned their own homes.

“I’ll get 50 phone calls within two hours,” Vergilov said of rental houses in that price range. He did, however, say that higher-end rental homes are sitting on the market longer. “That market is a little slower.”